An informed and thought-provoking analysis of what lies behind the headlines and headaches of business ethics and corporate social responsibility

Monday, March 7, 2011

Controversies in university funding: LSE and the Libyan connection

The London School of Economics has been embroiled in a major controversy regarding its relationship with the under-siege Libyan regime, and most particularly Saif Al-Islam Gaddafi, the son of the Libyan leader. Last week saw the shock resignation of the LSE's Director, Sir Howard Davies, as a direct result of the crisis - a major scalp for those arguing that the university had put commercial interests before its academic integrity. But the case is far from clear cut.

So what has got the internationally acclaimed university into such hot water? The critical issue here is the receipt of money from sources attached to the Libyan regime, including a donation of £1.5m from a charitable foundation run by Gaddafi's son, and £2.2m paid to the university to train Libyan officials. To complicate matters, Davies also acted as an advisor to the Libyan sovereign wealth fund. Oh, and Saif Al-Islam Gaddafi is an alumnus of LSE, whose PhD, awarded in 2008, is now the subject of a heated plagiarism scandal. As with the recent case of Karl-Theodor zu Guttenberg, the German Defence Secretary that we covered two weeks ago, an on-line campaign to identify and make public alleged plagiarism offences in Gaddafi’s doctoral thesis has gathered considerable momentum, forcing the university to instigate an academic offences investigation. Who knew that PhD plagiarism would be such an on-trend internet phenomenon in the first months of 2011?

Davies' resignation from his role as Director of LSE could not have been envisaged only weeks ago. But with Gaddafi senior and his Libyan regime now widely condemned after the dictator’s brutal response to the public uprising in the country, (and Gaddafi junior very much defending his father’s position) those with links to Gaddafi have also increasingly come under fire. And it’s not only pop stars like Usher, Beyonce, and Nelly Furtado. When a university such as LSE is linked in such a direct way to human rights abuses, it is no surprise that its reputation will come under fire. As Davies remarked about his resignation:

"I advised the [LSE] council that it was reasonable to accept the money and that has turned out to be a mistake," he said. "There were risks involved in taking funding from sources associated with Libya and they should have been weighed more heavily in the balance."

Well yes, that’s probably so. University leaders do have a responsibility for upholding the reputations of their institutions. And despite the recent charm offensive from Libya, it certainly did continue to pose a significant reputational risk. But then with hindsight that is, of course, easy to say. The UK government was certainly strongly encouraging the LSE to engage more with the country and there’s definitely a strong case to be made that bringing the educational heft of the LSE to the Libyan regime might well have made a contribution to enhancing openness and democracy in ways that only a liberal education can. This side of the argument was persuasively presented by our former colleague, Darryn Mitussis, writing in the Letters pages of the The Guardian newspaper:

“Introducing the children of autocracy to the best traditions of critical, reflexive British education and inculcating anointed leaders with the rigours of public accountability and transparency is a wonderful and deeply subversive thing to do (irrespective of the fee accepted). If – and only if – accepting the money required a compromise in the academic integrity of the syllabus then resignation is appropriate. If academic standards were not compromised and it was still wrong to take Libyan money, then it is also wrong to take money from any number of government scholarship schemes funded by undemocratic states (including Saudi Arabia and China) that prepare their chosen future leaders for business, political and scientific leadership.”

There is clearly a broader issue here about the appropriate balance of public, private and international funding for education. But we agree that given the reality of so much external funding, the main issue with funding is whether it impedes academic freedom. When “strings” are attached to funding the ethical problem is one of misusing power to distort knowledge. With “no strings attached” arrangements, this moves to a more vague “complicity” with undesirable people or organizations or being associated with “dirty money”. Not that these are inconsequential considerations. But there is certainly a good case that can be made for using “bad” money for “good” ends – as critics of Microsoft’s monopolizing tactics might recognize in the Bill and Melinda Gates Foundation, for example. In the case of LSE, there is no evidence as yet of any such strings – but maybe Davies' prompt resignation could hint at further skeletons in the closet. Time will tell.

Ultimately though, universities should be (but are not) better prepared for the risks associated with their funding arrangements, especially in the UK where a great deal of controversy is attached to funding sources in higher education (a subject that barely raises a peep in North America). We should know, having both worked in a CSR centre initially funded with tobacco industry money (which understandably caused a storm) and now occupying chairs named in honor of a company featuring no less than two disgraced CEOs (HP), and a business man who among his many accomplishments was responsible for bringing the renowned animal lovers KFC to Canada (George Gardiner) – neither of which has raised a murmur.

When we joined the BAT-funded International Centre for Corporate Social Responsibility at Nottingham University in 2002 we quickly joined Jeremy Moon, the Director, in establishing a governance structure and a funding policy that ensured academic independence and scholarly freedom along with clear lines of decision making and reporting. LSE, by comparison is now nearly 10 years later only just talking about a developing guidelines for donations as part of an independent inquiry into the Libyan affair. Perhaps it would also be wise to belatedly start tackling the issue of plagiarism more concertedly. Davies was unlucky to take the fall for an unexpected series of events in the Middle East. But he only has himself to blame for not instituting the systems and structures necessary to deal with the problems effectively in the first place.

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Andrew Crane [L] and Dirk Matten [R]

Welcome to the Crane and Matten blog - for informed commentary and expert analysis on the everchanging world of corporate responsibility.

We are two business school professors best known for our books and research articles on business ethics and corporate citizenship. We wrote the Crane and Matten blog from 2008-2015, offering unique insight on a range of issues from across the globe.

Andrew Craneis Professor of Business and Society in the School of Management, University of Bath.

Dirk Matten is the Hewlett Packard Chair in Corporate Social Responsibility in the Schulich School of Business, York University.